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commuted value of pension

Commutation Value of Pension

A Government servant has an option to commute a portion of pension, not exceeding 40% of it, into a lump sum payment as Commuted Value of Pension. If you exercise the option at the time of retirement, no medical examination will be required.

Calculation of Commuted Value of Pension: 


Lump sum payment of Commuted Value of Pension (CVP) is calculated with reference to the Commutation Table. The basic pension will be reduced by the portion commuted and the commuted portion will be restored after 15 years from the date of commutation made. However, Dearness Relief will continue to be calculated on the basis of the original pension (i.e. without reduction of commuted portion).

Here is the formula for how the commuted value of Pension (CVP) is calculated:
CVP = 40 % of Basic Pension X Commutation factor* X 12

* The commutation factor
You can find the exact commutation factor in the table below.

Moreover, you can also find an example of how to derive your CVP from your pension at the end of the Table below.


Age on next birthdayCommutation value expressed as the number of year’s purchaseAge on next birthdayCommutation value expressed as the number of year’s purchase
209.188518.808
219.187528.768
229.186538.724
239.185548.678
249.184558.627
259.183568.572
269.182578.512
279.180588.446
289.178598.371
299.176608.287
309.173618.194
319.169628.093
329.164637.982
339.159647.862
349.152657.731
359.145667.591
369.136677.431
379.126687.262
389.116697.083
399.103706.897
409.090716.703
419.075726.502
429.059736.296
439.040746.085
449.019755.872
458.996765.657
468.971775.443
478.943785.229
488.913795.018
498.881804.812
508.846814.611

For example:

If the Basic Pension of an employee is Rs. 12,000/-, Commutation is Rs. 12,000 x 40% = Rs. 4800/-. If the age at next birthday is 61 years then Commuted Values for Pension (CVP) from the above table = Rs. 4800 x 8.194 x 12 = Rs.4,71,974/- and Basic Pension will be reduced to Rs.7200/-. But the dearness relief will be calculated on full Basic Pension i.e. Rs.12000/- in this case.

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